Stocks moved slightly higher today following an announcement from the Treasury Department that it would increase purchases of longer-dated debt, targeting the same 10- to 30-year portion of the curve that has been under the most stress in recent weeks.
The announcement sparked a move in those durations, although much of the move in equities faded by the end of the day. Despite several major macro developments over the past few sessions, the SPX continues to trade in a tight range as options expiration effects remain a force. The intraday chart shows the effect the 7700 area strike had today:
It still feels like we’d have seen bigger moves on the news of the week were it not expiration week. Next week brings both NVDA and Jackson Hole after much of the current dampening is rolled off.
Yields: As one would expect, today’s biggest moves were longer-dated:
30YY: -10 bps
20YY: -10 bps
10YY: -6 bps to roughly 4.64%
2YY: Essentially unchanged
As a result, the 2s/10s spread narrowed, reversing part of the recent steepening.
Dollar: The other major moves on the Treasury Dept news was seen in the dollar. DXY: 98.80, its lowest level since May.
Gold: 4560, breaking out decisively above the 4500 level and reaching its highest level since May.
Bitcoin: Above 68,000, also at its highest level since May.
Oil: Oil was largely unchanged on the day, holding near recent levels.
FOMC Minutes: The minutes showed that three regional Fed presidents favored a quarter-point rate hike, while a number of other officials indicated that additional tightening could be necessary if inflation fails to continue moderating. The market’s reaction was relatively muted but the initial reaction was higher.
Today’s standout sector was Healthcare. The move was driven by news that a combination therapy involving Moderna (MRNA) and Merck (MRK) showed encouraging results as a melanoma vaccine treatment. MRNA: +150%, roughly $40 billion of market value added
Consumer Discretionary was higher, helped by strength in Home Depot and Lowe’s.
Technology lagged and was one of the weaker groups on the day with AVGO among the more notable drags.
Guy - My instincts suggest that Warsh was somewhat blindsided by this. [Treasury intervention]
Dan - I’m really surprised that this class action is weighing on the stock his much [META].
Articles Mentioned:
Dow rises as Treasury unveils plan to relieve bond market pressure (CNBC)
Moderna Shares More Than Double on Success of mRNA Cancer Vaccine (WSJ)
OpenAI ‘will be a public company in 2027’ or sooner, CFO Friar tells employees (CNBC)
Inside Big Tech’s Frantic Race to Quell the Growing Backlash to AI (WSJ)
Behind the Curtain: The new existential threat to AI (Axios)
Marvell pops 8% on AI chip deal that lets Google buy up to $12.2 billion in shares (CNBC)
China eases limits on Nvidia H200 chips as AI race escalates (FT)
As we mentioned yesterday, expiration-related effects continue to dominate price action. The SPX remains largely pinned in the 7700-7800 range, a pattern that has persisted for weeks.
This morning’s VIX expiration passed without much impact. The bigger event remains Friday’s monthly options expiration, when a large amount of index gamma rolls off. That doesn’t guarantee larger moves, but it does remove some of the market structure that has helped suppress volatility recently.
This is also historically some of most seasonally low volatility each year, with a pickup in the VIX usually occurring in Sept/Oct, so year end positioning is quite inexpensive in options at the moment.
Tomorrow’s earnings calendar touches several important themes with WMT, BABA and DE all before the open.
Thursday, August 20th
BABA Alibaba, Exp. Move 6.3%, Est: $10.72
WMT Walmart, Exp. Move 4.6%, Est: $0.74
DE Deere, Exp. Move 4.9%, Est: $4.67
8:30 AM - Initial Jobless Claims, Exp: 210, Prev: 209
8:30 AM - Philadelphia Manufacturing, Exp: 25, Prev: 41.4
11:10 AM - Fed’s Musalem speech
ROST Ross Stores, Exp. Move 6.7%, Est: $1.93
SPX Expected Move: 0.5%
Analysis - 30YY, TLT, US10YY, USDJPY, NVDA, AAPL, META, GOOGL, TGT, TJX, JPM
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Dan talsk with FirstMark Capital partner David Waltcher at the firm’s HQ to discuss Waltcher’s path from an Accel internship to investing in enterprise software, security, and AI. They compare the consumer-to-SaaS shift, the post-2021 “SaaSpocalypse,” and how public markets can overreact to AI narratives, using Salesforce as a system-of-record case study. Waltcher argues many incumbents will prove durable due to switching costs, ecosystems, and trust, while M&A is accelerating amid volatile publics, strong buyers, and fast-growing AI businesses, citing deals like Stripe–OpenRouter and interest in Workday.
The conversation turns to Chinese and open models driving token cost deflation and model routing, and to rising security threats, including agent-related incidents, fueling demand. Waltcher highlights FirstMark investments Onyx (agent security), Nebulock (agentic threat hunting), and Tracebit (assume-breach deception), and says innovation risk is highest if recession or a market crash hits, not from AGI timing debates.
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